Merkel greets Magna plan to acquire Opel

Saturday

May 30, 2009 at 11:05 AM

General Motors Corp. will sell most of its Opel unit and other European assets to Canada's Magna International Inc. in a deal German Chancellor Angela Merkel said Saturday would protect the assets from GM's likely bankruptcy.

The Associated Press

BERLIN — General Motors Corp. will sell most of its Opel unit and other European assets to Canada's Magna International Inc. in a deal German Chancellor Angela Merkel said Saturday would protect the assets from GM's likely bankruptcy.

The German government, GM and Magna International agreed early Saturday to a plan for the Canadian auto parts maker to acquire Opel with €1.5 billion ($2.1 billion) in bridge loans from Germany, while contributing €300 million to keep Opel running in the short term, Finance Minister Peer Steinbrueck told reporters.

"Opel has been given prospects for the future," Merkel said after overnight talks between the two companies and the German government. "Now the work for Opel and for Magna ... really begins."

Under the deal, Magna will take a 20 percent stake in Opel and Russian-owned Sberbank will take a 35 percent stake, giving their consortium a majority. GM will retain 35 percent, and the remaining 10 percent will go to Opel employees.

The consortium plans to work with Russian carmaker Gaz to produce more than a million vehicles in Russia and Eastern Europe. Sberbank's chairman German Gref praised the deal in an interview broadcast Saturday on Russia's state-run Vesti TV.

"We think that this is a very good chance for Russia to receive at an unprecedentedly low price one of the most progressive — from a technological standpoint — European automakers," Gref said.

The deal calls for Opel to be put under the care of a trustee later Saturday, designed to shield it from GM's likely bankruptcy filing next week.

Other GM Europe assets, including British brand Vauxhall and its plants, were consolidated under the Adam Opel GmbH earlier in the week and will also enter the trusteeship. Sweden's Saab is not included in the deal.

Germany had stressed the need for a trustee to ensure taxpayer assistance does not flow to GM stake holders in the U.S.

"The fault here is ... a major mismanagement in the United States of America by GM," Merkel said Saturday.

She said she spoke with President Barack Obama by telephone Friday as the deal with Magna was being negotiated.

In an interview earlier this week, GM Vice Chairman Bob Lutz, said GM and Opel would likely continue to share product development and engineering.

"It's a symbiotic relationship, and it saves a lot of cost, and I can't see a new partner saying, 'no, no, we're not going to do any of that anymore,'" Lutz said.

German officials, speaking on condition of anonymity because the particulars of the deal had not been announced, said Saturday that GM's minority stake would include continued cooperation on technology and development, though GM would exclude prized engineering properties such as the Corvette brand.

The Magna consortium and GM would also negotiate individual arrangements for markets including China, Canada and the U.S. to avoid competition between vehicles built with similar technology, the officials said.

Magna's co-CEO Siegfried Wolf said he expected the agreements with GM to be signed within five weeks.

Parliamentary committees in two states, Hesse and North Rhine-Westphalia, must still approve the financing. That is expected on Sunday.

While several governors and workers' representatives greeted the plan, Germany Economy Minister Karl-Theodor zu Guttenberg said he though the plan was risky enough that an "orderly insolvency" could still be the best bet to save Opel.

"I have a different risk assessment than my colleagues participating in the Opel negotiations," Guttenberg said in a statement. "Certainly an insolvency would also not currently be without risks."

As part of the deal, all four factories in Germany would stay open though Magna, based in Aurora, Ontario, has said previously it would need to shed some 2,600 jobs.

Opel employs 25,000 people in Germany, nearly half of GM Europe's work force.

German government officials said Magna's plan anticipated between 7,500 and 8,500 job cuts across Europe.

Opel and Vauxhall have operations in Belgium, Spain and Poland among other countries.

Merkel said Germany wanted to work closely with other European countries with GM Europe facilities as the plan developed.

"We are in close contact with Opel's European partners and the European division of GM," Merkel said.